Market Update: We break down the business implications, market impact, and expert insights related to Market Update: Russia’s economy loses its momentum—massive drops in profits and business closures / The New Voice of Ukraine – Full Analysis.
The Russian economy is collapsing (Photo: REUTERS/Ramil Sitdikov)
The Russian economy ended February with a decline. After a 2.1% drop in January, GDP contracted another 1.5% in February and 1.8% for the first two months of 2026 compared with the same period a year earlier, The Moscow Times reported on April 3, citing the State Statistics Service and the Ministry of Economic Development.
By March, the aggressor’s economy had erased all the growth recorded last year, which Rosstat had estimated at 1%.
“The risks of a slowdown in the Russian economy are growing,” notes Viktor Grigoriev, an analyst at Bank Saint Petersburg. Out of 28 industrial sectors tracked by Rosstat for January-February, 22 posted declines. Metallurgical plants saw output fall 15%, food production dropped 2%, and clothing and footwear production decreased 11.1%. Even military-related sectors slipped into recession: production of “finished metal products,” which state statistics classify to include bombs and shells, fell 1.9% year-on-year.
Wholesale trade turnover in Russia dropped 7.8% over the two months, while retail trade growth almost stopped — rising just 0.3% in February and 0.5% since the beginning of the year. Economist Olga Belenkaya of Finam called this the worst result since spring 2023: “Consumers have switched to savings mode amid slowing income growth, still-high lending rates, and increases in VAT and excise taxes.”
Businesses are also being forced to economize. Corporate profits plunged 30% at the start of the year, and major companies such as Lukoil, MMK, Severstal and Rusal ended last year with losses. As a result, 80% of big businesses have cut or frozen investments, and three-quarters are experiencing a crisis of non-payments from counterparties.
Russia’s economy is under pressure from sanctions and labor shortages, compounded by falling demand and reduced budget spending. High interest rates from the Central Bank are weighing on the entire real sector.
Earlier reports indicated that Russian oil and gas revenues in 2025 fell to their lowest level since the coronavirus pandemic.
The Russian budget may face a significant deficit in early 2026 due to shortfalls in oil and gas income, the government has said.
Ukraine’s intelligence has stated that the financial condition of medium and large Russian enterprises continued to deteriorate, showing growing imbalances in the corporate sector.
More than half of large companies ended 2025 with falling profits, cut or froze investment projects, and many are preparing layoffs.
As of late February 2026, around 300 companies in Russia were preparing to close.
For the first time in history, 74 Russian regions found themselves in financial trouble.
A wave of mass business closures has begun, and the Russian Finance Ministry has admitted that the hole in the treasury is growing at record rates.
Rosstat acknowledged that more than 17,000 Russian enterprises reported losses.
VkusVille became the first major food retailer to begin shrinking its network, closing 286 stores in 2025.
Magnit, Russia’s largest retail chain by number of stores, ended 2025 with a net loss.
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